Carmakers are raising car prices as supply of batteries and semiconductors falls short and demand for EV causes "carflation." South Korea's battery prices are rising for the first time in more than a decade as lithium, cobalt, and nickel prices continue to rise.
South Korean news outlet ET News and other media recently reported that battery cell prices rose by about 2%. A survey report was cited as saying that lithium battery pack price is expected to rise 2.3% in 2022 as well.
Sharp increase in metals
Demand for EVs was projected to be growing from three million to 4.1-4.2 million units from 2020 to 2021. But car prices are not coming down as production expands, and they continue to climb as demand outgrows supply and costs of metals shoot high.
According to data from Korea Resources Corporation, current cobalt prices are 119% higher than the average price throughout 2020, while lithium prices are 410% higher than the 2020 average and nickel prices have risen 47%.
The price of Hyundai's latest model Santa Fe is 5-7% higher than its older models. Although the carmaker said the price hike is attributed to enhanced safety features and convenience, it still lays quite much pressure on car buyers. Prices of imported GM models, such as Chevrolet's Colorado, are said to have risen 5-9% in South Korea.
Carflation
In addition to rising costs of batteries, semiconductor shortages are also causing a stir in the car market. Excessive, post-pandemic demand is contributing to the price surge as well. The "carflation" is happening more widely not only in South Korea but also the whole world as supply falls short.
According to official statistics, prices of steel, aluminum, and magnesium are also pushing car prices higher and higher. Hyundai Steel and Posco Steel, suppliers of Hyundai Motor, are reportedly going to raise quotes by about KRW120,000 (US$104) per tonne.
Higher car prices do not seem to deter car buyers. Volkswagen, Toyota, GM and Tesla are expected to profit from the carflation. Hyundai has raised its 2021 operating profits target to 4.5-5.5% from 4.0-5.0%. Volkswagen has also raised its profit outlook.
